Are there rainy days ahead for cloud computing? – BBC news

This year, software company 37signals expects to see a profit increase of more than $1 million (£790,000) by moving away from the cloud.

“That we can achieve this with such relatively modest changes to our business is astonishing,” said co-owner and Chief Technology Officer David Heinemeier Hansson.

The American company has millions of users for its online project management and productivity software, including Basecamp and Hey.

Like many companies, it has outsourced data storage and computing to a third party, called a cloud service provider.

They own huge data centers where they host other companies’ data, which is accessible over the Internet.

In 2022, such services will cost 37signals $3.2 million.

“Seeing the bill every week really radicalized me,” says Mr. Heinemeier Hansson.

“I thought, ‘Wait! What are we spending on a week’s rent?’ I could buy some really powerful computers for just one week’s rent. [cloud] expenditure.”

So he did. Buying hardware and hosting it in a shared data center costs $840,000 per year.

While the costs prompted Mr Heinemeier Hansson to take action, there were other factors that also raised concerns.

The internet is designed to be extremely resilient.

“I saw the distributed design erode as more and more companies gravitated toward primarily three owners of computers,” he says, referring to the three leading cloud providers.

If a large data center fails, large parts of the Internet can go offline.

The cloud, he says, was presented as cheaper, easier and faster. “The cloud wasn’t able to simplify things enough that we could measure the productivity gains,” he says, noting that his operations team has always been about the same size.

Was using the cloud faster?

“Yes, but it didn’t matter,” says Mr. Heinemeier Hansson.

“If you want to connect a hundred servers to the internet, you can do that in less than five minutes [in the cloud]. That’s unbelievable.

“But we don’t need five-minute turnaround times on a huge number of additional servers, and I don’t believe the vast majority of companies need that either.”

He can have new servers delivered and installed in his data center within a week, which is fast enough.

37signals does use the cloud to experiment with new products. “We needed big machines, but we only needed them for 20 minutes,” says Mr. Heinemeier Hansson.

“The cloud is ideal for this. It would be a shame to buy that computer and leave it unused 99.99% of the time.”

He still recommends the cloud for early-stage companies. “If you’re a speculative startup and there’s a lot of uncertainty about whether you’re going to be around in 18 months, you absolutely shouldn’t spend money buying computers,” he says. “You should rent them.”

37signals isn’t alone in bringing workloads back from the cloud, also known as cloud repatriation.

Digital workplace company Citrix found that 94% of large US organizations it surveyed had worked to repatriate data or workloads from the cloud in the past three years.

Reasons cited included security concerns, unexpected costs, performance issues, compatibility issues and service outages.

Plitch offers software that allows people to customize single-player games, including the difficulty level.

The company built its own private data centers and moved cloud workloads there. As a result, the company saved an estimated 30% to 40% on costs after two years.

“A key factor in our decision was that we have highly proprietary R&D data and code that must remain strictly secured,” says Markus Schaal, managing director at the German company.

“If our investments in features, patches and games were to leak out, it would be an advantage for our competitors. While the public cloud offers security features, we ultimately discovered that we needed complete control over our sensitive intellectual property.

“As our AI-enabled modeling tools evolved, we also needed significantly more processing power, which the cloud could not provide within budget.”

He adds: “We occasionally experienced performance issues during periods of heavy use and limited customization options through the cloud interface. By moving to a private infrastructure we gained full control over purchasing hardware, software installation and networking optimized for our workloads.”

Mark Turner, Chief Commercial Officer at Pulsant, helps companies migrate from the cloud to Pulsant’s colocation data centres in the UK.

In a colocation arrangement, the customer owns the IT hardware but houses it at another company, where it can be stored safely, at the right temperature and with power backup.

“The cloud remains the largest piece of IT infrastructure, but there is a sweet spot for on-premises, physical, secure infrastructure,” he says. “There is a repatriation of things that should never have been in the cloud or that don’t work in the cloud.”

Some of its largest repatriation customers are online software providers, with each additional customer putting more load on the server, driving up cloud costs.

One of those customers is LinkPool, which makes smart contracting possible using blockchain. It was developed in the public cloud, initially using free credits. Business was booming and the cloud bill reached $1 million per month. Using colocation reduced costs by up to 85%.

“[The founder has] now has four racks in a data center in the city where he lives and works, connected to the world. He competes with his competitors and can shift his price point because his costs do not move with them [with customer demand]”, says Mr. Turner.

“The change leaders in the IT industry today are the people who don’t say cloud first, but say cloud when it fits,” he adds. “Five years ago, the change disruptors were cloud first, cloud first, cloud first.”

Of course, not everyone is repatriating. Cloud computing will continue to be a huge business, with AWS, Microsoft’s Azure and Google Cloud Platform being the biggest players.

For companies like Expedia, they are essential.

The company has used the cloud to consolidate 70 petabytes of travel data from its 21 brands.

Applications also run in the cloud, except for older software that does not yet work there.

“We are experts in travel,” said Rajesh Naidu, chief architect and senior vice president of Expedia. “[Cloud providers] are experts in running infrastructure. That’s one less thing I have to worry about while we focus on running our business.”

“One of the most important things the cloud gives us is a global presence, the ability to deploy our solutions closer to the region where they are needed,” he says.

“The other thing is the resilience and availability of the infrastructure. Cloud providers have really designed and architected their infrastructure well. We can benefit from their innovation.”

Expedia has an excellent cloud center, which saved approximately 10% on cloud costs last year.

“You have to put policies in place otherwise companies can easily incur huge cloud costs,” says Mr Naidu. “You can reject things if you don’t need them. When you consume [cloud resources] sensible, then your bill at the end of the day will not be a surprise.”